Yes, the employer mandate (often called the “Play or Pay” rule) of the Patient Protection and Affordable Care Act (“PPACA”) has been delayed until 2015. However, many other provisions of PPACA are already in effect or will take effect in 2014. Right now, employers should prepare for (or begin preparing for) the following, which are scheduled to become effective in 2014:
Individual Mandate – Every individual (subject to certain limited exceptions) will be required to have health insurance or pay a penalty beginning January 1, 2014. The penalty for 2014 is the greater of a flat dollar penalty of $95 per adult/ $47.50 per child (up to $285 for a family) or an amount equal to 1% of family income.
Even though the Individual Mandate applies to individuals, not employers, employers should be aware of the mandate and the penalty amounts because employees who have questions often seek the advice of their Human Resources contact during open enrollment (e.g., If I drop coverage, and have no health coverage at all, will I be subject to any penalty?)
Health Insurance Exchanges – The state or federal health insurance exchanges (now called “Marketplaces”) will begin open enrollment on October 1, 2013 with coverage to be effective January 1, 2014 or later. Individuals who do not receive minimum and affordable health care coverage from an employer may be eligible for premium subsidies through the Marketplace. Employers should determine whether the coverage they plan to offer in 2014 is “qualified” (e.g., provides minimum essential coverage at an affordable cost).
When the Play or Pay rule becomes effective in 2015, employers will pay a penalty for each full-time employee enrolling in the Marketplace and receiving a premium subsidy for such coverage. Therefore, for employers with 50 or more full-time employees (or full-time equivalents), 2014 is a year for planning and evaluating coverage levels and costs. If an employer determines that its penalty under the Play or Pay Rules would have been significant in 2014 but for the delay, it can make changes to its coverage levels to reduce or eliminate any penalty under the Play or Pay rule in 2015.
- Summary of Benefits and Coverage – Employers and plan sponsors must provide participants with a Summary of Benefits and Coverage (“SBC”) during the open enrollment period for the 2014 Plan Year. The following information has been added to the SBC:
- Does this plan provide “Minimum Essential Coverage”? (If “yes” – the participant has coverage that satisfies the Individual Mandate.)
- Does this coverage meet the “Minimum Value Standard”? (If “yes” and the coverage provides Minimum Essential Coverage – the coverage is affordable and enrollees will not be eligible for subsidized coverage bought through the Marketplace.)
Notices – Marketplace Notices must be sent by October 1, 2013- Most employers must send all current employees a notice by October 1, 2013 letting them know that they can get coverage through the Marketplace. This notice must be provided to new employees within 14 days of their hire date.
While model notices are available through the Department of Labor, employers (and Human Resource representatives) will likely receive a number of questions from employees regarding their options (employer coverage vs. Marketplace coverage). The better informed an employer is, the better able it is to respond to such questions.
COBRA – COBRA election notices must be modified to inform COBRA qualified beneficiaries of coverage options available through the Marketplace and about other PPACA changes.
What should employers be doing now?
- Continue to plan for how your health plan will meet the new Play or Pay rules in 2015.
- Prepare HR personnel to respond to questions about the new Marketplace and to confirm employee data and coverage if requested by the Marketplace to help determine an employee’s eligibility for premium subsidies.
- Decide on a method to determine if variable hour employees are full-time and therefore subject to the Play or Pay rules. An employer can use a measurement period of up to 12 months to see if a variable hour employee will average 30 or more hours per week. For example, the measurement period for current employees could begin October 15, 2013 and end October 14, 2014 so that variable hour employees who are determined to be full-time can be enrolled during the fall open enrollment and begin participating in the plan on January 1, 2015. That means employers with variable hour employees may need to start tracking hours in just a couple of months.
- Make sure the plan documents and summary plan descriptions are updated to reflect the required changes.
REMINDER: We want to take this opportunity to remind employers that the following reforms are still effective for plan years beginning in 2014:
- Community rating used in determining premiums for individuals and small groups- Insurers may vary their premiums based only on age, geography, family size and tobacco use. In addition, insurers may not charge the oldest insureds more than three times what they charge the youngest insureds and may not charge tobacco users more than 50% more than what they charge non tobacco users. This could result in decreased premiums for older or less healthy individuals/groups and increased premiums for younger, healthier individuals/groups when the policy is renewed in 2014. For this reason, some insurers are permitting employers to renew early (e.g., December 1, 2013) to delay the higher premiums.
- Eligible employees must be brought into the plan within 90 days of hire.
- All pre-existing condition exclusions (regardless of age) are eliminated.
- For non-grandfathered group health plans:
a. The annual deductible for insured small group health plans cannot be more than $2,000 for individuals and $4,000 for families.
b. The out-of-pocket maximum for essential health benefits (including major medical, pharmacy, and mental health/substance use disorder benefits) cannot be more than $6,350 for individuals and $12,700 for families.
c. Certain benefits must be provided to individuals who participate in clinical trials.